Scottish Power first quarter profits collapse

Supply business reiterates call for abolition of standard variable tariffs amid energy retail furore

Scottish Power has blamed mild weather, rising non-energy costs and tighter margins for a collapse in profits in the first quarter of 2017.  

The big six supplier reported earnings before interest, taxation, depreciation and amortisation (EBITDA) of £47 million in the three months to the end of March – a 73 per cent fall when compared to same period last year.   

Customer numbers remained level over the period at 5.5 million, but were up by around 100,000 year-on-year. Even so, retail earnings fell 58 per cent to £58 million.

The generation division went from a £34 million profit to an £11 million loss in large part due to the closure of its Longannet coal-fired power station in March 2016. 

Scottish Power chief corporate officer Keith Anderson said: “The retail business has seen a redution due to tighter margins, increasing non-energy costs and mild weather.

“We have increased our customer numbers year-on-year, and we have also increased the number of customers actively on a fixed product. More than half of our customers are now on a product rather than the standard variable tariff, which is the best of the major suppliers.

“Margins across the industry are tight because competition has been increasing, and switching numbers remain high.”

Commenting on the Conservative party’s commitment to include a price cap in its manifesto for the upcoming election, Anderson said such a measure would “harm competition”.

Reiterating his firm’s recommendation to the Competition and Markets Authority, he called for the government to make a “bold move” by abolishing standard variable tariffs “once and for all” and moving every customer onto a fixed price deal.

“Just as you insure your car every year and go to the market for the best deal for you, so every energy customer should engage with the market at least once a year to make sure they are on the best deal for them,” he argued.

“The government could impose a target that two out of three customers should be on a deal by the end of 2018 and all customers on a deal by the end of 2019”.

He continued: “Any company that fails to meet these targets should have a price cap not only imposed but retained until all their customers are on deals.”

Meanwhile, Scottish Power Renewables has reported a 7 per cent rise in EBITDA to £90 million after output grew 34 per cent to 1,164GWh due favourable weather conditions and increased capacity.

The firm invested more than £168 million in its renewable portfolio during the quarter, including placing several major contracts for the East Anglia One offshore wind farm which it will begin constructing later this year. 

EBITDA from SP Energy Networks dropped 6 per cent to £210 million, largely as a result of to the “phasing of investments” as part of RIIO-ED1. The firm spent £160 million upgrading power lines and substations in the three months to the end of March.

Scottish Power, Scottish Power Renewables and SP Energy Networks are all owned the Spanish utility Iberdrola, which saw its EBITDA decline by 4.7 per cent year-on-year to €827 million. The group said it expects to make up for the poor performance over the rest of 2017.